Jim Flaherty had the potential to be something better than Canada’s worst finance Minister ever, if he had only taken an afternoon to learn the difference between "tax deferred" and "tax exempt". Failing which, he has proven himself to be a financial Neanderthal and complete hypocrite. Allow me to explain.
“Tax exempt” means that taxes are never paid or collected
“Tax deferred” means that taxes are paid and collected at a later date.
This is where Jim Flaherty comes in. God help us all.
Jim Flaherty claims RRSPs are "tax exempt", when in reality they are "tax deferred".
It is clear that Jim Flaherty has a hate on for RRSPs. This is why he double taxes income trusts in RRSPs.
His logic is:
“As Minister of Finance, I have a fiduciary obligation to the taxpayers of Canada today, not tomorrow, an obligation to pay for needed social, environmental and economic programs today, not tomorrow. I cannot, and I will not, fund today's programs from tomorrow's revenues”
This is where Jim Flaherty’s hypocrisy factory come in:
Jim Flaherty however tries to rationalize that Ontario Teachers’ buying BCE in debt levered buyout is okay, since:
"The purpose of the pension funds, ultimately, is to ensure they can honour their pension obligations. And there is taxation, of course, when pensions are paid out,"
Why then doesn’t that same logic apply to RRSPs and income trusts?
Flaherty isn’t fooling anyone. Here’s what Laurence Booth, an expert in structured finance at Toronto's Rotman School of Management had to say, and who likened the Finance Minister's efforts to stem tax leakage to the title character in a Dutch legend.
"[Flaherty] is a bit like the Dutch boy who has his finger in the dyke. He plugs one hole but then, bingo, another hole pops up."
As such Flaherty thought it was okay to impose a $35 billion loss on Canadians' retirement savings with this lame logic of his and by treating tax deferred RRSPs as if they were tax exempt.
So what does he do for an encore?
He introduces the Tax Free Savings Account. Tax free meaning "tax exempt",as in no taxes ever paid or collected. Tax exempt meaning: “As Minister of Finance, I have a fiduciary obligation to the taxpayers of Canada today, not tomorrow, an obligation to pay for needed social, environmental and economic programs today, not tomorrow. I cannot, and I will not, fund today's programs from tomorrow's revenues”
Flaherty is deserving of the Lifetime Achievement Award for Hypocrisy in a Leading Role.
Now we learn that Flaherty is opposing the measures passed by the House that would make the $5,000 allowable contributions to Registered Educational Savings Plans eligible for tax deferred status:
Ottawa vows to block education tax shelter
This from the very person who introduced the $200,000 Registered Disability Savings Plan in Budget 2007.
Let’s recap Flaherty;s hypocrisy:
Income trusts in RRSPs: "Bad", since they are tax deferred
Income trusts in pension plans: "Good", since they are tax deferred
Investments in Tax Free Savings Accounts: "Good", since they are tax exempt
Savings in Registered Educational Savings Plans: "Bad", since they are tax deferred
Savings in Registered Disability Savings Plan: "Good", since they are tax deferred
This type of hypocrisy is only lacking a name to make it acceptable. Might I suggest “leveling the playing field” or “Tax Fairness Plan”, or maybe the more accurate description would be "Registered Disability Savings Plan, Writ Large."
Friday, March 7, 2008
Posted by Fillibluster at 10:06 AM